ALBART FINANCE HOUSE LTD., MUMBAI V. ACIT., 5(1), MUMBAI

ITA 6047/MUM/2011

• Counselvise Citation: 604719914 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-03-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Bad and doubtful debts; Difference of opinion; Provision of bad debts
• Section: 143(3)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO.6047 /MUM/2011 ( / ASSESSMENT YEAR : 2002-2003 M/S ALBARR FINANCE HOUSE LTD., INDIA HOUSE NO. 2, KEMPS CORNER, MUMBAI 400 036. / VS. A.C.I.T. 5(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. ./ PAN : AAACQA3573F ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A PPELLANT BY SHRI B.V. JHAVERI R E SPONDENT BY : SHRI M.L. PERUMAL ) * / DATE OF HEARING : 26-3-2014 ) * / DATE OF PRONOUNCEMENT : 30-04-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A)- 9, MUMBAI DATED 14-7-2011 FOR A.Y. 2002-03 WHEREBY HE CONFIRMED THE PENALTY OF RS. 8,07,600/- IMPOSED BY THE A.O. U /S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKI NG FINANCE COMPANY WHICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29-10- 2002 DECLARING TOTAL LOSS OF RS. 54,97,968/-. IN TH E ASSESSMENT COMPLETED U/S 143(3) OF THE ACT, DEDUCTION CLAIMED BY THE ASS ESSEE ON ACCOUNT OF PROVISION FOR BAD DEBTS AMOUNTING TO RS. 22,62,379/ - AS PER THE PRUDENTIAL NORMS OF RBI WAS DISALLOWED BY THE A.O. ON THE GROU ND THAT THE RELEVANT BAD ITA 6047/M/11 2 DEBTS HAVING NOT BEEN WRITTEN OFF BY THE ASSESSEE F ROM ITS BOOKS OF ACCOUNT, THE DEDUCTION WAS NOT ALLOWABLE U/S 36(1)(VII) OF T HE ACT. WHEN THE MATTER REACHED TO THE TRIBUNAL, THE TRIBUNAL RESTORED THIS MATTER TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH AS PER THE GUIDEL INES GIVEN IN ITS ORDER PASSED IN ASSESSEES OWN CASE ON A SIMILAR ISSUE FO R A.Y. 2001-02. THE A.O. ACCORDINGLY FOLLOWING THE ASSESSMENT ORDER PASSED I N A.Y. 2001-02 AS PER THE GUIDELINES GIVEN BY THE TRIBUNAL, CONFIRMED THE DIS ALLOWANCE MADE ON ACCOUNT OF PROVISION FOR BAD DEBTS. HE ALSO INITIAT ED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPOSED IN RESPECT OF DISALLOWANCE MA DE ON ACCOUNT OF PROVISION FOR BAD DEBTS. IN REPLY, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE PROVISION FOR BAD DEBTS WAS MADE AS PER TH E PRUDENTIAL NORMS OF RBI AND DISCLOSURE TO THIS EFFECT WAS CLEARLY MADE IN T HE NOTES TO ACCOUNTS FILED ALONG WITH THE AUDITED FINAL ACCOUNTS. IT WAS CONTE NDED THAT THE PROVISION FOR BAD DEBTS THUS WAS MADE IN ACCORDANCE WITH THE RBI PRUDENTIAL NORMS APPLICABLE TO THE ASSESSEE AS A NON-BANKING FINANCI AL COMPANY AND ALL THE RELEVANT DETAILS RELATING TO THE SAID CLAIM HAVING BEEN FULLY AND TRULY FURNISHED ALONG WITH THE RETURN OF INCOME, THERE WA S NO CASE FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. IT WAS ALSO CONTE NDED THAT THIS ISSUE WAS A DEBATABLE ISSUE AS THE SAME WAS DECIDED IN FAVOUR O F THE ASSESSEE BY SOME OF THE BENCHES OF THE TRIBUNAL AND MERELY BECAUSE THE LEGAL CLAIM OF THE ASSESSEE MADE ON CONTENTIOUS ISSUE WAS NOT FOUND AC CEPTABLE BY THE A.O., PENALTY U/S 271(1)(C) OF THE ACT COULD NOT BE IMPOS ED. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. AND H E PROCEEDED TO IMPOSE THE PENALTY OF RS. 8,07,600/- U/S 271(1)(C) OF THE ACT BEING 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN RESPECT OF D ISALLOWANCE MADE ON ACCOUNT OF PROVISION OF BAD DEBTS. 3. THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL PREFERRED BEFORE THE L D. CIT(A) AND THE SUBMISSIONS MADE BEFORE THE A.O. WERE REITERATED ON BEHALF OF THE ASSESSEE ITA 6047/M/11 3 BEFORE THE LD. CIT(A) IN SUPPORT OF ITS CASE THAT T HE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT WAS NOT SUSTAINABLE. THE LD. CIT(A), HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE A ND CONFIRMED THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT FOR TH E FOLLOWING REASONS GIVEN IN PARA 10 OF HIS IMPUGNED ORDER:- I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AS SESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. I HAVE ALSO GONE THR OUGH VARIOUS CASE LAWS REFERRED BY THE APPELLANT. THE MAIN ARGUMENT OF THE APPELLANT IS THAT BOOKS OF ACCOUNTS ARE AUDITED AND IT HAS MADE PROVISION AS PER PRUDENTIAL NORMS OF THE RESERVE BANK OF INDIA. THE OTHER ARGUMENT THAT THE ADDITION HAS BEEN ON ACCOUNT OF DIFFERENCE OF OPINION AND THEREFORE THERE IS NOT CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, THE SCRUTINY OF FAC TS DOES NOT FAVOUR THE AFORESAID CLAIM OF THE APPELLANT AND THERE IS A CLEAR CUT MENTION IN THE PROVISION OF SEC.36(1)(VII) THAT PROVISION OF B AD DEBTS CAN BE ALLOWED WHEN THE AMOUNT OF BAD DEBTS HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS. THE FACTS OF THE PRESENT CASE ARE DIFFERE NT. THE APPELLANT HAS NOT WRITTEN OFF THE BAD DEBTS AS IRRECOVERABLE IN T HE BOOKS OF ACCOUNT AND IT HAS MADE THE PROVISION FOR BAD DEBTS. SO THE POSITION OF THE CASE WAS FACTUAL AND DIFFERENT THAN THE CASE LAWS RELIED BY THE APPELLANT. IN FACT THE APPELLANT WAS KNOWING THAT IT HAS NOT WRIT TEN OFF THE BAD DEBTS IN THE BOOKS OF ACCOUNT INSPITE OF THAT IT HAS CLAI MED PROVISION FOR BAD DEBTS WHICH IS CLEAR VIOLATION OF THE PROVISION OF THE INCOME-TAX ACT. IT MAY BE NECESSARY FOR THE APPELLANT TO MAKE PROVISIO N AS PER PRUDENTIAL NORMS OF RESERVE BANK OF INDIA TO COMPUTE TAXABLE I NCOME BUT SECTION 36(1)(VII) IS VERY CLEAR ABOUT THE ALLOWABILITY OF BAD DEBTS. THERE IS NO DOUBT ABOUT THE POSITION OF WRITING OFF OF BAD DEBT S AFTER THE AMENDMENT IN THIS SECTION. THE WRITTEN OFF OF BAD D EBTS IN THE BOOKS OF ACCOUNTS IS NECESSARY WHICH HAS NOT BEEN FULFILLED BY THE APPELLANT AND INSPITE OF THAT IT HAS CLAIMED THE PROVISION FOR BA D DEBTS. SO FAR THE ARGUMENT OF DISCLOSURE OF FACTS IN THE BOOKS OF ACC OUNTS, BALANCE SHEET OF THE COMPANY IS CONCERNED, DISCLOSURE MEANS IT SH OULD BE TRUE AND FULL DISCLOSURE OF FACTS TO JUSTIFY THAT CLAIM. THI S DOES NOT AMOUNT TO TRUE DISCLOSURE AND THE APPELLANT CANNOT ESCAPE FRO M LEVY OF PENALTY WITH THE HELP OF THIS ARGUMENT. IN FACT, THE ASSESS ING OFFICE HAS ARRIVED AT A RIGHT RELYING ON THE PROVISION OF SEC.36(1)(VI I) AND THE LANGUAGE OF WHICH IS VERY CLEAR ABOUT BY MAKING CLAIM OF PROVIS ION FOR BAD DEBTS AND KEEPING THE BAD DEBTS ALIVE IN THE BOOKS OF ACC OUNT, THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN T HE RETURN. THEREFORE, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN LEVYIN G PENALTY U/S.271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. TH US, THIS GROUND OF APPEAL IS DISMISSED. ITA 6047/M/11 4 AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSE SSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED BEF ORE US THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE THE AUTHORITI ES BELOW IN SUPPORT OF ITS CASE THAT THE PENALTY IMPOSED BY THE A.O. AND CONFI RMED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN THE FACTS AND CIRCUMSTANCES OF T HE CASE. HE SUBMITTED THAT EVEN THOUGH THE PROVISION FOR BAD DEBTS MADE BY THE ASSESSEE AS PER THE PRUDENTIAL NORMS OF RBI WAS DISALLOWED BY THE A.O. FOLLOWING HIS ASSESSMENT ORDER FOR A.Y. 2001-02, NO PENALTY WAS IMPOSED BY H IM IN RESPECT OF THE SIMILAR DISALLOWANCE MADE ON A.Y. 2001-02. HE ALSO SUBMITTED THAT THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY THE ASSESSEE ON 29-12-2002 AND AT THAT TIME, THERE WERE ATLEAST TWO DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF OVERSEAS SANMAR FINANCIAL L TD. VS. JCIT [2003] 86 ITD 602 (CHENNAI) AND IN THE CASE OF TEDCO INVESTME NT & FINANCIAL SERVICES (P.) LTD. VS. DCIT [2003] 87 ITD 298 (DELHI) TAKING A VIEW IN FAVOUR OF THE ASSESSEE ON THE SIMILAR ISSUE. HE SUBMITTED THAT TH E CLAIM MADE BY THE ASSESSEE ON ACCOUNT OF PROVISION FOR BAD DEBTS THUS WAS A BONAFIDE CLAIM AND THE SAME IN ANY CASE INVOLVED A DEBATABLE ISSUE IN RESPECT OF WHICH PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE IMPOSED. HE SUBM ITTED THAT EVEN ALL THE PARTICULARS RELATING TO THE CLAIM MADE BY THE ASSES SEE ON ACCOUNT OF PROVISION FOR BAD DEBTS WERE FULLY AND TRULY DISCLOSED IN THE RETURN OF INCOME ITSELF AND THERE WAS NO CASE OF FURNISHING OF ANY INACCURATE P ARTICULARS OF ITS INCOME BY THE ASSESSEE. HE RELIED ON THE DECISION OF INDORE B ENCH OF THIS TRIBUNAL IN THE CASE OF DHAR JILA SAHAKARI & GRAMIN VIKAS BANK VS. DCIT RENDERED VIDE ITS ORDER DATED 25-01-2011 PASSED IN ITA NO. 211 & 212/ IND/2010 AND SUBMITTED THAT THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IN RESPECT OF SIMILAR ADDITION MADE BY WAY OF DISALLOWANCE OF PRO VISION FOR BAD DEBTS MADE AS PER THE PRUDENTIAL NORMS OF RBI WAS CANCELLED BY THE TRIBUNAL IN THAT CASE. ITA 6047/M/11 5 5. THE LD. D.R., ON THE OTHER HAND, STRONGLY RELIE D ON THE ORDERS OF AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE THAT THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT AND CONFIRMED BY THE LD. CIT(A) IS FULLY SUSTAINABLE IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE DEDUCTION ON ACCOUNT OF PROVISION FOR BAD DEBTS MADE AS PER THE PRUDENTIAL NORMS OF RBI WAS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR T HE YEAR UNDER CONSIDERATION ON 29-10-2002 AND AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, THERE WERE ATLEAST TWO DECISIONS OF THE TRIBUNAL AV AILABLE AT THAT TIME TAKING A VIEW IN FAVOUR OF THE ASSESSEE ON THIS ISSUE. THE C LAIM MADE BY THE ASSESSEE ON ACCOUNT OF PROVISION FOR BAD DEBTS THUS WAS A BO NAFIDE CLAIM AND ALTHOUGH THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF NE W INDIA INDUSTRIES LTD. ACIT, [2007] 18 SOT 51 (DELHI) [SB] HAS SUBSEQUENTL Y TAKEN A VIEW IN FAVOUR OF THE REVENUE ON THIS ISSUE, WE AGREE WITH THE CON TENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME WAS A DEBATABLE ISSU E AT THE TIME OF FILING OF RETURN OF INCOME BY THE ASSESSEE. IT IS ALSO OBSERV ED THAT IN THE CASE OF DHAR JILA SAHAKARI & GRAMIN VIKAS BANK (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASSESSEE, A SIMILAR ISSUE HAD COME UP FOR CONSIDERA TION BEFORE THE CO-ORDINATE BENCH OF THIS TRIBUNAL WHEREIN PENALTY U/S 271(1)(C ) OF THE ACT WAS IMPOSED IN RESPECT OF DISALLOWANCE OF ASSESSEES CLAIM MADE FOR BAD DEBTS AND DOUBTFUL DEBTS. THE SAID CLAIM WAS MADE BY THE ASSE SSEE AS PER THE INSTRUCTIONS AND CIRCULARS OF RBI AND ALL THE PARTI CULARS RELATING THERETO WERE DULY DISCLOSED BY THE ASSESSEE IN THE AUDITED ACCOU NTS FILED ALONG WITH THE RETURN OF INCOME. IN THESE FACTS AND CIRCUMSTANCES INVOLVED IN THE SAID CASE, THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT WAS CA NCELLED BY THE TRIBUNAL HOLDING THAT THE DISALLOWANCE OF PROVISION MADE FOR BAD AND DOUBTFUL DEBTS WOULD NOT ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. KEEPING IN VIEW THIS ITA 6047/M/11 6 DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF DHAR JILA SAHAKARI & GRAMIN VIKAS BANK (SUPRA) AND HAVING REG ARD TO ALL THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT IT IS NOT A FIT C ASE TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE CANCEL THE P ENALTY IMPOSED BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) AND ALLOW THIS APPE AL OF THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30-04-2014. ) 0 1 30-04-2014 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 30-04-2014 [ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. 4 () / THE CIT(A)9 MUMBAI. 4. 4 / CIT 5 MUMBAI 5. $8 , * 8 , / DR, ITAT, MUMBAI A BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI